India Shining
: A Growth Opportunity
Historical Asia Perspective
• According to ADB report
• In 1820, 60% of world GDP was in Asia.
• After industrial revolution, Asia lost to
Europe and reduced to 20% of world GDP
in 1940.
• In 2006, it reached 40% of World GDP and
expected to be original 60% of World GDP
by 2025.
• Asia is booming and major contributors
are Japan, China and India.
India : An Overview
Macro Factors – Population
• Population – 1000+ Million – 50 Million
Rich and 300 Million Middle class
Macro Factors - Composition
• 65% of population below 35 years
• 54% below age 25 years
• Working population in India is growing unlike
most other developed countries
• Emerging Large Consuming Class
• China has issues of median age 30-34 years at
the early stage of development and psychology
issues after implementation of “one child policy”
Macro Trends – Population
• From joint family system to Nuclear Family
growing
• Housing Boom – due to nuclear family, low
interest rates, tax benefits from
government and lastly strong Indian
values driven by savings and “owning
home”
• Resulting into high growth of home textile
category
Consumption of Lifestyle
Products
• Customer Segments –
• Super Haves(SEC A+),
• Haves (Upper Middle Income Group- SEC
a1/a2),
• Strivers and
• Strugglers
Super Haves
• 2.1% of urban youth and adults in 2000
• lead global oriented westernized
lifestyle
• contribute to the bulk of purchase of
international and super premium brands
• highly conscious of status and image,
they patronize brands which add to their
self esteem
• high spender and less price conscious
Haves
• 9% of urban youth and adults in 2000
• financially secure upper middle income
group
• upwardly mobile and seek more
recognition
• brand conscious and key customer to
Indian lifestyle brands, however looks
for VFM
• Seeks contemporary brands within their
price bands
Haves Household will multiply
• The All Have segment will multiply 4 times
to touch 23 million by 2012
• this is the fastest growing segment
• a very attractive for premium lifestyle
brands
Macro Factors - Size
• Retail industry is expected to be USD 225
billion and growing at 5%.
• Economy - 4h largest economy in the
world on PPP basis -One of the fastest
growing economy with 6.5% average
growth in GDP for last 10 years
Macro Factors - Size
• Textile/Apparel – USD 35 Billion out of
which
• Exports - USD 13 Billion
• Domestic Apparel Market - USD 18.5
• Home Textile - USD 1.4 Billion
• Domestic Bed and Bath - USD .5 Billion
Change Drivers
• Exposure on electronic media – integration of
global trends, yet distinct Indianism - by 2007, it
is expected to have 67 Million household
connected by cable and satellite.
• International Travel - 4 Million traveled abroad in
2003
• Increase in credit friendliness – 50k crore in
2000 to 160k crore in 2004 - 18 Mn credit cards
and likely to touch 75 Mn by 2010
Where do these consumers
buy? - Retail network
Retailers - Population
• Fragmented retailing with 5 million
retailers and 96% less than 500 sq ft –
nation of shop-keepers -brilliant trading
and entrepreneur community
• Lowest per capita retail space 2 v/s 16
in USA
Key Retail Insights
• India is 1/7th size but 5 times the
population of USA. A retail format that is
successful in US or elsewhere might not
work in India. India is more similar to
China in terms of structure of market.
• The cost of space in India can go up due
to population pressure. Signs of high
rental and property prices visible.
Commercial Structure
• Low cost of entrepreneurship
• Low gross margin for branded product
business as well as retail business e.g.
Gucci, BHS v/s Indian brands or
retailers, though real estate and
operation cost are relatively higher
Political Structure
• Unity in diversity – Culture, convictions, values,
customs, language, lifestyle, climate etc
• Sound democratic tradition with now aggressive
judiciary and media
• Model of growth – brilliant entrepreneurship,
superior corporate governance, globally
competitive service industry, rising consumption
and not just export-led
However,
• Low cost retail is very critical for long term
profitability and survival. Indian retail
square ft must deliver higher sales/price
than many other countries.
Retail Revolution in India
Market Evolution Cycle
•
•
•
•
1994-2000 – Brand Boom
2000-04 – Retail Boom
2004- Mall boom
However, home textile industry largely
missed product upgrade cycle (unlike
many other home product categories like
furniture, ceramics etc) from 1994 to 2004
and now addressing all stages of evolution
cycle together
In the year 2007
• For one set of customers time poverty
setting in like many developed countries
whereas for other classes, shopping
remains the best week-end outing
destination.
• Shopping Malls driving retail boom – by
2007, 356 shopping malls with 90 million
square feet is expected to be operational
International Players
• Despite FDI in retail not allowed,
• Metro – already established “Cash and Carry
Operation”
• ‘Shop-rite’ and ‘Marks and Spencer’ started
direct to customer through franchise route
• Wal-Mart with Bharti and Carrefour with Landmark Group are set to enter franchising route
• This is apart from single brand retail by large
number of companies across sectors.
Domestic Players
• Reliance – Mega-retail plans
• Hyper-markets – Ambitious expansion
plans by Big Bazaar, Star India Bazaar,
Spencer etc
• Same with Department stores category –
Shoppers’ Stop, Pantaloons, Lifestyle,
Pyramid and so on.
• Rural Malls – ITC, Hariyali Mall – Sriram
Group, Godrej
Finally, Home Retailers
• Home Stop by Shoppers’ Stop– Home Center by
Lifestyle – 2 – Ambitious expansion plans
• @home (Nilkamal Group)– from 0 to 7 in last
one year and 30+ in next 3 years
• Home Improvement Category - Housefull
(Renaissance Group)– 4 to 50 in 3 years, Home
Town by Pantaloon – 6 within one year and
Hind-ware (Somany Group)– likely to start with
mega plans
• In addition, traditional specialty home textile
retailers are growing very well.
Ambitious Retail plans are
changing the retail land-scape in
favor of Organized retail.
Composition of Retail
1999 2002
Total Retail 7000 8250
in INR 000
Million
150
50
Organized
Retail in INR
000 Million
.7% 1.8%
%
2006
estimat
ed
13500
3200
3.2%
It translates into
• Organized retail growing at 30%+ p.a.
compound growth. is expected to reach
Rs. 270000/- crore ( USD 60 Billion )by
2011. The share of organized retail is
expected to reach between 14 to 16% of
total retail in 2011 from 3.2% in 2006.
Organized retail is changing rules
of the game
• Traditional marketing methods do not
apply anymore. Pressure to all consumer
product marketing companies.
• Earlier business was driven by size
(though size as business strategy may
even work now), scale, street smartness,
networking and contacts. Now, businesses
are driven by strategic business vision and
values.
New Growth vehicles
• New Product Capabilities and organized
retail format have been developing market
for many new product categories.
• Expected growth of retail formats - Hyper,
Category Killer and Consolidators in
wholesale segment
Consumers in India
Traits of India Customer
• Argumentative Indian – like to speak,
argue, demand value – reflect in buying
behavior
• Core Traditional values and changing
modern values with distinct Indianism
Indian customer is traditional.
• RTS (ready to stitch) to RTW (ready to wear) –
though tailor-made garments are still popular –
37% of total sales.
• In one of the most posh area in India, lady
customers get cotton filling pillow made with
cheap shell fabric in retail shop at very low cost.
• Indian customers is used to experience
products. E.g. open and check bed-sheet set. Or
while buying audio set, take a cd from home and
play to listen to the real effect while buying the
set.
Indian customers are changing
• Design and quality acquiring significance
as market moves towards growth phase
especially in Home textile.
• Consumer is willing to buy expensive
products in right environment e.g. dust-bin
for 10k, marriage gift bedding set for 50k,
Rs. 3/- lac bed-room set at Home Center
and lamp at Rs. 22 lac - niche products
etc
Value for Money
• Indianized solution required – Anything will not
work – Shanghai to Spain – Value not by
European bench-mark or by an exporters’
bench-mark. Value is not just cheap. They are
willing to pay the price if they see value. E.g.
Soya quilt
• Pragmatic in consumption – Many premium
category customers fill their ward-robe during
twice a year end-season sales though they can
afford to buy at full price.
Pricing
• For premium products, one set of customer
willing to buy, second set of customer will buy
after they get used to premium price and last set
will never buy.
• Penetrative pricing to get entry into retail as well
as to get customer look at brand. From
McDonald to Pizza Hut have Indian menu and
Indian entry prices. Case of Pillow marketer.
Most brands have introduces volume drives
though brand imagery is always premium.
HT products
• Product category in the order of emotional
attachment in buying process - Apparel,
Living Room and then bed/bath products.
• Living room brands complement each
other and need not be same for bed and
bath.
Overview Of The Attitude Towards HT
Low involvement
Towels
Completely
personal
No show value
attached
Frequency of
purchase twice
in a year
Nothing special
about it
Matter of fact
Very need
based
Curtains
For interiors
Reflection of
class & prestige
Considered to be
very important
part of the
upholstery
Frequency of
purchase once in
two years
High involvement
High involvement
Bed sheets
For others others would
see
Reflection of
certain class &
prestige
Important for the
overall upkeep
of the house
Personal
involvement in
choosing the
right kind of bed
sheet
Frequency of
purchase almost
quarterly
Personal
clothes
For self hence
require
ultimate
attention
Very high
involvement
and indulgence
Mostly
planned. At
times impulse
purchase too
Frequency of
purchase is
high - almost
once a month
Trends For bed linen category
• A lady considers bed-sheet sets is the most
inexpensive tool to change look of the room.
Willing to spend more. A see change in last 3
years when bed-linen was bought like
commodity.
• Co-ordinated solution of complete bed-room is
required.
• Growth in sales of air-conditioners (400% at
Vivek’s in last summer) and change in lifestyle –
Sales of quilt and blanket
Business Opportunity
• Top 5 retailers commanding 4% market
share compared to 30%+ in USA, UK and
Germany
• No brand commanding 5% share in any
category in Home Textile market
• After saturation of apparel market, HT has
grown world over. Indication of same trend
visible in India
However
• A consumer wants all fashion, experience,
convenience, services, good quality and
good brand ALL AT A REASONABLE
PRICE.
Thank You